The Rupee hits 56.52 intraday

Dealers said that the rupee, which closed on Wednesday at 56.23, opened weak and soon breached its previous intra-day low of 53.38 to touch 56.52. However, around 3 p.m. there were rumours that the oil companies would cease buying dollars from the open market and purchase them from select public sector banks. This was seen as a precursor to an arrangement where oil companies would buy dollars directly from RBI. However, oil company officials denied that there was any such arrangement leading to the rupee to slide back. Dealers said that RBI’s intermittent intervention was adding to intra-day volatility in the rupee as the central bank was unsuccessful in either reversing or stopping the slide in the rupee. While there is no move yet to sell dollars directly to oil companies, RBI has tabled a proposal to allow foreign institutional investors higher limits for investment in government bonds. The report also contains recommendations to increase liquidity in the debt market. Data released by exchanges showed that foreign investors have increased their holding of government debt by over $600 million.